Food vs. fuel: A false and dangerous premise

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By Steve Grasz

If truth is the first casualty of war, it appears the “food fight” being waged by anti-ethanol interests has nearly achieved its first casualty. The false idea that ethanol production is causing high food prices, and even food shortages around the world, has been so frequently asserted that Americans have begun to blindly accept the premise. However, when the facts are examined it is clear the wild accusations are untrue. Let’s examine several of the myths about ethanol:

Myth:  Ethanol is made from “food grains.”

Fact: Ethanol is made from “feed grains” such as corn and sorghum. “Food grains” usually refers to wheat and rice. Blaming ethanol for wheat and rice shortages is unfounded. The type of corn used to produce ethanol is otherwise used primarily for livestock feed (about 90 percent), not for human consumption.

Myth: Ethanol “consumes” a huge share of U.S. corn production.

Fact: In 2006, U.S. farmers produced 10.74 billion bushels of corn — 1.8 billion bushels went to produce ethanol. The share going to ethanol is increasing. However, making ethanol does not “consume” the corn. Ethanol production separates the starch from the other components. The protein and other nutrients remain, but in a less bulky form. One-third of the corn is converted to a high-value livestock feed called distillers grain (by dry milling) or corn gluten feed (by wet milling).

Myth: Use of corn for ethanol production is creating food shortages and causing starvation around the world.

Fact: The United States is exporting more corn today than at any time in history. Exports in 2007-08 were 2.25 billion bushels, 6 percent more than in 2006-07. The USDA recently raised U.S. corn export estimates to 2.5 billion bushels. This puts U.S. corn exports at 63 million metric tons, a new record, and 16 percent above last year.

Myth: Ethanol is responsible for high food prices.

Fact: The price of corn is a very small factor in overall food prices. Only about 10 percent of U.S. corn is processed directly into human food products (such as corn syrup, starch and cereals). In contrast, the price of oil has a significant impact on food prices, as does the value of the dollar. Some analysts have estimated that oil prices would be 15 percent higher but for ethanol production and its replacement of large quantities of petroleum. Ethanol currently supplies the same amount of fuel to Americans as our fifth-largest foreign supplier. Without it, gas prices (and food prices) would be even higher.

Less than 20 cents of each food dollar goes toward on-farm costs like grain. The value of the corn in an 18 oz. box of corn flakes cereal was 4.9 cents in 2007 (with corn at $3.40 per bushel). Today, with corn at nearly $6 per bushel, the value of the corn in a box of corn flakes is about 8.75 cents. So, even in a pure corn product, the impact on consumers is modest.

America needs ethanol now, more than ever. The U.S. imports 62 percent of its petroleum supply, and this is projected to increase to 77 percent by 2025. Oil production is declining in many areas of the world. The last time a new oil refinery was built in the United States was more than 30 years ago. Taxpayers spend billions of dollars each year on military expenditures to protect our foreign oil supply while Congress refuses to expand domestic drilling for environmental reasons. In contrast, ethanol is made from renewable resources we grow right here in the United States. Its use reduces our dependence on imported oil. The U.S. ethanol industry will have the capacity to produce 10 billion gallons in 2008.

The idea that people must choose between food and ethanol is a false and dangerous premise. The critics need to be called to account. The next time you hear or read that ethanol production is starving children overseas or causing food prices to soar, consider the all-time record amounts of corn being exported from the United States or the fact that doubling the price of corn raises the cost of a box of corn flakes by less than 4 cents — and think again.

Steve Grasz is an Omaha attorney who served as chief deputy in the Nebraska Attorney General’s office. This piece is an excerpt from a presentation he made earlier this month to the National Association of Attorneys General.